Do I Need a Will or a Trust?
Do I Need a Will or a Trust?
By Rustin Diehl
People often ask me whether a will or a trust is right for them. As with many legal questions, my answer is usually, “It depends.” When choosing between a will and a trust, there are a number of considerations you must think about before deciding which is right for you.
How large is the estate?
One of the primary considerations when deciding whether a will or trust is right for a client is the nature and value of the property the client owns. A Last Will and Testament may be a good, simple choice for people who do not own a home or other assets.
However, for people who own a house, a Last Will and Testament may not be the best plan. This is because properly transferring the title to a home requires a court action—called “probate”—to properly transfer the title. As a result, in 1991, the AARP began recommending that homeowners plan for their estate with a Revocable Living Trust in order to avoid probate.
What are your family needs, values, and goals?
In deciding between a will and a trust, you must consider your family. Not only must your plan address the health concerns and financial accountability of a spouse, children, and grandchildren, but it must also address your relationships. If tension between family members exists, you must consider whether a will, which would probably require “probate,” will cause your children to begin fighting each other in court—turning your legacy into a public debacle. Because of probate, many people prefer to simply plan for their family dynamics by using a trust.
Does your plan need the type of organization that a trust plan would ensure?
Perhaps one of the most important components of planning your will or trust is the planning itself. Because a Last Will and Testament is a letter of instruction to your executor about what he or she should do with your property, it requires less planning and work. Trusts, on the other hand, are “entities” which can hold title to property, similar to a corporation. In order to ensure that the trust will automatically pass property to the trust-maker’s family, a good estate plan should include some assistance. Transferring property such as homes, stocks, business interests, and bank accounts into the trust assists with implementing the trust. Additionally, the property inside of a revocable trust stays in control of the trust-maker so that you can use, spend, sell, or transfer back out of the trust.
The organizational work of transferring property to a trust is often one of the most valuable parts of a trust plan. It not only provides a consolidation and centralization of property, but also helps clients to determine how to better utilize their resources in providing for themselves and their families.